The bread crumbs theory of economic growth

The bread crumbs theory of economic growth

THE leading lights of the country recently got together at a two-day colloquium starting last Saturday, and they discussed the wefts and warps of Bangladesh economy. Although some news reports claimed the participants had lauded the progress made so far, reading between the lines gave a different story. Each of the participants actually uttered cautionary words carefully couched in academic parlance. The only exception was our finance minister, whose null hypothesis gave away the dull state of his mind. It was an admission of confusion when he said, amongst other things, that the country without political stability was doing quite well.
What the minister said in good jest must have been a Freudian slip of tongue. He confessed to three things which are key deterrents to economic growth. Two of them he cited as major failures are the absence of a large-scale manufacturing sector and stagnant private sector investments. Third one is unemployment, which he confirmed was a serious problem.
After that the minister stumbled again. He argued that people were managing to survive somehow because of expansion of services and rural activities. But he contradicted himself when he explained that services which could be provided by one person are being provided by three persons. Does that mean one position has created three employments? The minister didn't tell us how it tied in with his concern over unemployment.
Other discussants concurred that unemployment and investment were two challenges facing Bangladesh. This is where we should take a deep breath to understand what's going on. The rate of growth is one of the most important indicators reflecting a nation's economic health. Andwhen there's growth in GDP, there's also growth in personal income, business, and jobs.
But when does growth happen to the satisfaction of all? Three signs give clear indications. Investors feel good and start putting their money into productive assets. Employers feel good and start hiring. Consumers feel good and start buying.
If that's the litmus test of economic growth, where does it stand when investors aren't investing and jobs are not being created? If the consumers are still feeling good and buying, it may be an unwholesome symptom of an unholy economy. It could mean people aren't legitimately earning their incomes but making money through questionable means.
There has been a great deal of controversy over the growth rate in this country.This finance minister every year projected higher target and international agencies and domestic experts disagreed in tandem with him. Then we have also got this ever swelling budget figure, much of which never gets implemented anyway.The government seems to have inured itself to the mindset of a village idiot. It believes size is more important than substance.
Since World War II, the US economy, largest in the world, has averaged 3.3% growth per year. Nonetheless, the growth magnitude is important for a small economy like Bangladesh if it has to achieve high levels of production, consumption and investment. But that isn't the only way to look at its success. A big budget is popular amongst politicians perhaps because it gives them more room for abuse, misuse, bribery, cuts and commissions. In fact, the real thrust of budget should be on something else. Low growth rate isn't so bad provided distribution of income is more efficient.
A foreign speaker on the first day of the colloquium observed that distribution of wealth in the country hasn't been that unequal and it hasn't got worse, which was why the country has performed well in terms of poverty reduction. It's true that per capita income has gone up. It's true that people can afford more amenities in life. At the same time it's also true that the stinky rich Bangladeshis have stashed away Tk. 32.36 billion in Swiss banks. Affluent Bangladeshis have invested many times more that amount in second homes and businesses to keep their families in safety and comfort.
This is why a country needs government. The energetic and the innovative in any economy will always find ways to make more money, but the government must ensure that fruits of economic growth reach everyone. It can be done by growing the pie bigger at once slicing up the pie in an equitable manner.
What has happened so far can be called the bread crumbs theory of growth. The economy has grown but the benefits concentrated in a very few hands. And the bread crumbs from the tables of these rich folks have been falling at an increasing rate. It has created the illusion of progress down the rungs.
That essential truth didn't get enough emphasis. Instead, the two days saw intellectual exercise in beating around the bush that only reinforced the cliché. The economy is nothing but an excuse to deprive people of what rightfully belongs to them.

The writer is Editor, First News and an opinion writer for The Daily Star.
Email: badrul151@yahoo.com

Copyright:

Any unauthorized use or reproduction of The Daily Star content for commercial purposes is strictly prohibited and constitutes copyright infringement liable to legal action.